SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT 1934
For the quarterly period ended July 31, 2005 Commission File No. 1-11507
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES ACT OF 1934
For the transition period from to
JOHN WILEY & SONS, INC.
(Exact name of Registrant as specified in its charter)
NEW YORK 13-5593032
- --------------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
111 RIVER STREET, HOBOKEN NJ 07030
- --------------------------------------- ------------------------------------
(Address of principal executive offices) Zip Code
Registrant's telephone number, (201) 748-6000
including area code ------------------------------------
NOT APPLICABLE
-----------------------------------------------------
Former name, former address, and former fiscal year,
if changed since last report
Indicate by check mark, whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
Check whether the registrant is an accelerated filer (as defined in Rule 12b-2
of the Exchange Act. YES [X] NO [ ]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). YES [ ] NO [X]
The number of shares outstanding of each of the Registrant's classes of common
stock as of August 31, 2005 were:
Class A, par value $1.00 - 48,337,074
Class B, par value $1.00 - 10,703,163
This is the first page of a 43-page document
JOHN WILEY & SONS, INC.
INDEX
PART I - FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements.
Condensed Consolidated Statements of Financial Position - Unaudited
as of July 31, 2005 and 2004, and April 30, 2005...........................................3
Condensed Consolidated Statements of Income - Unaudited
for the three months ended July 31, 2005 and 2004..........................................4
Condensed Consolidated Statements of Cash Flows - Unaudited
for the three months ended July 31, 2005 and 2004..........................................5
Notes to Unaudited Condensed Consolidated Financial Statements.............................6-12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................................................13-18
Item 3. Quantitative and Qualitative Disclosures About Market Risk...................................19
Item 4. Controls and Procedures......................................................................20
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.............................................................20
SIGNATURES AND CERTIFICATIONS........................................................................21-23
EXHIBITS.............................................................................................24-25
JOHN WILEY & SONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(In thousands)
(UNAUDITED)
July 31, April 30,
------------------------------------ ----------------
2005 2004 2005
---------------- --------------- ----------------
Assets
Current Assets
Cash and cash equivalents $ 13,075 40,424 $ 89,401
Marketable Securities - - 10,000
Accounts receivable 155,721 146,168 137,787
Inventories 83,329 81,452 83,372
Deferred income tax benefits 5,921 12,394 5,921
Prepaid and other 12,398 11,973 12,437
---------------- --------------- ----------------
Total Current Assets 270,444 292,411 338,918
Product Development Assets 59,555 58,022 61,511
Property, Equipment and Technology 108,239 115,835 115,383
Intangible Assets 300,903 280,644 291,041
Goodwill 193,146 195,400 195,563
Deferred Income Tax Benefits 4,208 8,437 4,285
Other Assets 26,564 22,808 25,868
---------------- --------------- ----------------
Total Assets $ 963,059 973,557 $ 1,032,569
================ =============== ================
Liabilities & Shareholders' Equity
Current Liabilities
Accounts and royalties payable $ 78,391 76,325 $ 70,958
Deferred subscription revenue 97,443 90,028 142,766
Accrued income taxes 33,399 29,754 36,376
Accrued pension liability 6,190 5,272 6,229
Other accrued liabilities 54,437 58,736 84,982
---------------- --------------- ----------------
Total Current Liabilities 269,860 260,115 341,311
Long-Term Debt 192,473 200,000 196,214
Accrued Pension Liability 63,828 50,254 62,116
Other Long-Term Liabilities 34,191 31,258 34,652
Deferred Income Taxes 2,700 2,597 1,702
Shareholders' Equity
Class A & Class B common stock 83,191 83,190 83,191
Additional paid-in-capital 61,428 51,402 55,478
Retained earnings 529,779 456,912 507,249
Accumulated other comprehensive income (3,580) 5,611 1,982
Unearned deferred compensation (4,554) (3,465) (3,074)
Treasury stock (266,257) (164,317) (248,252)
---------------- --------------- ----------------
Total Shareholders' Equity 400,007 429,333 396,574
---------------- --------------- ----------------
Total Liabilities & Shareholders' Equity $ 963,059 973,557 $ 1,032,569
================ =============== ================
The accompanying Notes are an integral part of the condensed consolidated
financial statements.
JOHN WILEY & SONS, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
(In thousands except per share information)
Three Months
Ended July 31,
------------------------------------
2005 2004
----------------- ----------------
Revenue $ 236,749 $ 226,939
Costs and Expenses
Cost of sales 76,821 75,229
Operating and administrative expenses 124,706 118,434
Amortization of intangibles 3,066 2,499
----------------- ----------------
Total Costs and Expenses 204,593 196,162
----------------- ----------------
Operating Income 32,156 30,777
Interest income and other (net) 535 157
Interest expense (2,043) (1,344)
----------------- ----------------
Net Interest Expense and Other (1,508) (1,187)
----------------- ----------------
Income Before Taxes 30,648 29,590
Provision For Income Taxes 2,791 9,706
----------------- ----------------
Net Income $ 27,857 $ 19,884
================= ================
Income Per Share
Diluted $ 0.46 $ 0.32
Basic $ 0.47 $ 0.32
Cash Dividends Per Share
Class A Common $ 0.090 $ 0.075
Class B Common $ 0.090 $ 0.075
Average Shares
Diluted 60,642 62,851
Basic 58,916 61,442
The accompanying Notes are an integral part of the condensed consolidated
financial statements.
JOHN WILEY & SONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW - UNAUDITED
(In thousands)
For The Three Months
Ended July 31,
-----------------------------------
2005 2004
----------------- ----------------
Operating Activities
- --------------------
Net income $ 27,857 $ 19,884
Adjustments to reconcile net income to cash provided by (used for) operating activities
Amortization of intangibles 3,065 2,499
Amortization of composition costs 8,476 8,349
Depreciation of property, equipment and technology 8,198 7,487
Non-cash charges & other 16,724 12,263
Tax benefit on foreign dividend repatriation (7,476) -
Change in deferred subscription revenue (45,184) (37,528)
Net change in operating assets and liabilities (40,622) (19,279)
----------------- ----------------
Cash Used for Operating Activities (28,962) (6,325)
----------------- ----------------
Investing Activities
- --------------------
Additions to product development assets (12,878) (11,709)
Additions to property, equipment and technology (4,734) (5,066)
Acquisitions (15,359) (5,709)
Sale of marketable securities 10,000 -
----------------- ----------------
Cash Used for Investing Activities (22,971) (22,484)
----------------- ----------------
Financing Activities
- --------------------
Borrowings of long-term debt 50,000 -
Repayment of long-term debt (50,000) -
Purchase of treasury stock (21,314) (9,784)
Cash dividends (5,334) (4,505)
Proceeds from exercise of stock options 2,659 1,350
----------------- ----------------
Cash Used for Financing Activities (23,989) (12,939)
----------------- ----------------
Effects of Exchange Rate Changes on Cash (404) 145
----------------- ----------------
Cash and Cash Equivalents
Decrease for Period (76,326) (41,603)
Balance at Beginning of Period 89,401 82,027
----------------- ----------------
Balance at End of Period $ 13,075 $ 40,424
================= ================
Supplemental Information
Businesses/Rights Acquired:
Fair value of assets acquired $ 20,276 $ 5,709
Purchase price payment accrued (1,000) -
Liabilities assumed (3,917) -
----------------- ----------------
Cash Paid for Businesses/Rights Acquired $ 15,359 $ 5,709
================= ================
Cash Paid (Refunded) During the Period for:
Interest $ 1,270 $ 1,022
Income taxes - Net $ 3,370 $ (3,515)
The accompanying Notes are an integral part of the condensed consolidated
financial statements.
JOHN WILEY & SONS, INC., AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments, consisting only
of normal recurring adjustments, necessary to present fairly the
consolidated financial position of John Wiley & Sons, Inc., and
Subsidiaries (the "Company") as of July 31, 2005 and 2004, and results of
operations and cash flows for the three month period ended July 31, 2005
and 2004. The results for the three months ended July 31, 2005 are not
necessarily indicative of the results expected for the full year. These
statements should be read in conjunction with the most recent audited
financial statements contained in the Company's Form 10-K for the fiscal
year ended April 30, 2005.
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.
Certain prior-year amounts have been reclassified to conform to the current
year's presentation.
Stock-Based Compensation: Stock options and restricted stock grants are
accounted for in accordance with Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees," and the disclosure-only
provisions of Statement of Financial Accounting Standards (SFAS) No. 123,
"Accounting for Stock-Based Compensation," as amended by SFAS No. 148,
"Accounting for Stock-Based Compensation - Transition and Disclosure."
Accordingly, the Company recognizes no compensation expense for fixed stock
option grants since the exercise price is equal to the fair value of the
shares at date of grant. For restricted stock grants, compensation cost is
generally recognized ratably over the vesting period based on the fair
value of shares.
Pro forma information under SFAS No. 123 and SFAS No. 148
---------------------------------------------------------
The per share value of options granted in connection with the Company's
stock option plans during the following periods are estimated using the
Black Scholes option pricing model with the following weighted average
assumptions:
For the Three Months Ending
July 31,
---------------------------------------
2005 2004
----------------- ----------------
Expected life of options (years) 8.0 8.1
Risk-free interest rate 3.9% 4.5%
Volatility 27.1% 26.2%
Dividend yield 0.9% 0.9%
Per share fair value of options granted $13.61 $11.00
For purposes of the following pro forma disclosure, the fair value of the
awards was estimated at the date of grant using the Black Scholes
option-pricing model and amortized to expense over the options vesting
periods.
For the Three Months Ending
July 31,
---------------------------------------
(in thousands except per share amount) 2005 2004
----------------- ----------------
Net income as reported $27,857 $19,884
Stock-based compensation, net of tax, included in the
determination of net income as reported -
Restricted stock plans 1,324 744
Director stock plan 14 14
Stock-based compensation costs, net of tax, that would have been
included in the determination of net income had the fair
value-based method been applied (2,866) (2,112)
---------------- ----------------
Pro forma net income $26,329 $18,530
================= ================
Reported earnings per share
Diluted $0.46 $0.32
Basic $0.47 $0.32
Pro forma earnings per share
Diluted $0.43 $0.29
Basic $0.45 $0.30
2. Comprehensive Income
--------------------
Comprehensive income was as follows (in thousands):
For the Three Months Ending
July 31,
---------------------------------------
2005 2004
----------------- ----------------
Net income $27,857 $19,884
Change in other comprehensive income (loss), net of taxes:
Foreign currency translation adjustment (5,562) 3,414
----------------- ----------------
Comprehensive income $22,295 $23,298
================= ================
A reconciliation of accumulated other comprehensive gain (loss) follows (in
thousands):
Three Months Ended July 31, 2005
------------------------------------------------------
Beginning Change for Ending
Balance Period Balance
-------------- -------------- --------------
Foreign currency translation adjustment $28,531 (5,562) $22,969
Minimum pension liability, net of tax (26,549) - (26,549)
-------------- -------------- --------------
Total $1,982 (5,562) $(3,580)
============== ============== ==============
3. Weighted Average Shares for Earning Per Share
---------------------------------------------
A reconciliation of the shares used in the computation of income per share
follows (in thousands):
For the Three Months Ended July 31,
---------------------------------------
2005 2004
----------------- ----------------
Weighted average shares outstanding 59,175 61,676
Less: Unearned deferred compensation shares (259) (234)
----------------- ----------------
Shares used for basic income per share 58,916 61,442
Dilutive effect of stock options and other stock awards 1,726 1,409
----------------- ----------------
Shares used for diluted income per share 60,642 62,851
================= ================
4. Inventories
-----------
Inventories were as follows (in thousands):
As of
As of July 31, April 30,
----------------------------------- ---------------
2005 2004 2005
--------------- -------------- ---------------
Finished goods $72,156 $70,844 $72,931
Work-in-process 5,668 6,805 6,743
Paper, cloth and other 7,935 6,403 6,028
--------------- -------------- ---------------
85,759 84,052 85,702
LIFO reserve (2,430) (2,600) (2,330)
--------------- -------------- ---------------
Total inventories $83,329 $81,452 $83,372
=============== ============== ===============
5. Acquisitions
------------
In the first quarter of fiscal year 2005, the Company acquired the Journal
of Microscopy and Analysis, a controlled circulation journal, for
approximately $5.4 million, which is recorded as acquired publication
rights. The acquired publication rights are being amortized over a 15-year
period.
On May 31, 2005, Wiley acquired substantially all the assets of a global
publisher of computer books and software, specializing in IT business
certification materials, for approximately $13.5 million, including related
acquisition costs and final payments due to the seller. The acquisition
cost has been primarily allocated to acquired publication rights and the
net tangible assets acquired, which consisted primarily of accounts
receivable, inventory, accrued royalties, accounts payable and other
accrued liabilities. The acquired publication rights are being amortized
over a 10-year period. The Company is in the process of completing
valuations necessary to finalize the purchase price allocation.
On July 11, 2005, the Company acquired the rights to a newsletter
publishing division of a leading publisher of mental health and addiction
information, for approximately $1.4 million in cash, plus liabilities
assumed. The majority of the acquisition is recorded as acquired
publication rights and is amortized over a 10-year period.
6. Recent Accounting Standards
---------------------------
In December 2004, the FASB issued Statement No. 123 (revised 2004) ("SFAS
123R") "Share-Based Payments." SFAS 123R will require the Company to
measure the cost of all employee stock-based compensation awards based on
the grant-date-fair-value and to record that cost as compensation expense
over the period during which the employee is required to perform service
under the terms of the award. The statement eliminates the alternative
method of accounting for the employee share-based payments previously
available under Accounting Principles Board Opinion No. 25. SFAS 123R will
be effective beginning in the Company's first quarter of fiscal year 2007.
The Company currently discloses the pro forma effect of SFAS 123 in the
notes to these financial statements. The impact of SFAS 123R adoption has
not yet been quantified but is expected to approximate the proforma effect
as disclosed in the notes to the financial statements.
7. Segment Information
-------------------
The Company is a global publisher of print and electronic products,
providing must-have content and services to customers worldwide. Core
businesses include professional and consumer books and subscription
services; scientific, technical, and medical journals, encyclopedias, books
and online products and services; and educational materials for
undergraduate and graduate students, and lifelong learners. The Company has
publishing, marketing, and distribution centers in the United States,
Canada, Europe, Asia, and Australia. The Company's reportable segments are
based on the management reporting structure used to evaluate performance.
Segment information is as follows:
Three Months Ended July 31,
----------------------------------------------------------------------------------
2005 2004
----------------------------------------- -------------------------------------
(thousands)
Inter- Inter-
External segment External segment
Customers Sales Total Customers Sales Total
------------- -------------- ------------ ------------ ----------- ------------
Revenue
-------
U.S. segments:
Professional/Trade $70,438 8,078 78,516 $68,331 7,577 75,908
Scientific, Technical, and Medical 46,439 2,314 48,753 44,466 1,740 46,206
Higher Education 37,692 7,850 45,542 37,468 8,007 45,475
European segment 58,427 4,699 63,126 54,131 5,392 59,523
Asia, Australia & Canada 23,753 403 24,156 22,543 923 23,466
Eliminations - (23,344) (23,344) - (23,639) (23,639)
------------- -------------- ------------ ------------ ----------- ------------
Total Revenue $236,749 - 236,749 $226,939 - 226,939
------------- -------------- ------------ ------------ ----------- ------------
Direct Contribution to Profit
-----------------------------
U.S. segments:
Professional/Trade $18,842 $15,551
Scientific, Technical, and Medical 24,545 22,269
Higher Education 17,019 16,051
European segment 18,627 18,694
Asia, Australia & Canada 3,251 3,191
------------ ------------
Total Direct Contribution to Profit 82,284 75,756
Shared Services and Administrative Costs
----------------------------------------
Distribution (11,848) (11,739)
Information technology (15,052) (12,269)
Finance (7,860) (7,212)
Other administrative (15,368) (13,759)
------------ ------------
Total Shared Services and Administrative Costs (50,128) (44,979)
------------ ------------
Operating income $32,156 $30,777
---------------- ============ ============
8. Intangible Assets
-----------------
Intangible assets consist of the following (in thousands):
As of
As of July 31, April 30,
----------------------------------- ---------------
2005 2004 2005
---------------- -------------- ---------------
Intangible assets not subject to amortization
Branded trademarks $57,900 $57,900 $57,900
Acquired publication rights 118,566 117,452 120,426
---------------- -------------- ---------------
Total intangible assets not subject to amortization 176,466 175,352 178,326
Net, intangible assets subject to amortization, principally
acquired publication rights 124,437 105,292 112,715
---------------- -------------- ---------------
Total $300,903 $280,644 $291,041
================ ============== ===============
9. Derivative Financial Instruments
--------------------------------
Under certain circumstances, the Company enters into derivative financial
instruments to hedge against foreign currency fluctuation on specific
transactions or interest rate volatility. The Company does not use
derivative financial instruments for trading or speculative purposes. The
Company did not hold any derivative financial instruments during the first
quarter of fiscal year 2006.
10. Marketable Securities
---------------------
During the first quarter of fiscal year 2006, the Company sold marketable
securities for approximately $10.0 million. The marketable securities
consisted entirely of shares of variable rate securities issued by
closed-end funds that invest in a diversified portfolio of government and
corporate securities. Generally, these securities do not have a stated
maturity date and reset their dividends every 28 days. These securities
were accounted for as available-for-sale in accordance with SFAS No. 115
"Accounting for Certain Investments in Debt and Equity Securities." For the
quarter ended July 31, 2005, $0.1 million was recognized as interest income
on those securities. There were no comparable investments at July 31, 2004.
11. Income Taxes
------------
The tax provision for the first quarter of fiscal year 2006 includes $7.5
million, or $0.12 per diluted share, of tax benefits associated with the
reversal of a tax accrual recorded on the repatriation of dividends from
European subsidiaries in the fourth quarter of fiscal year 2005. On May 10,
2005, the US Internal Revenue Service issued Notice 2005-38. The notice
provided for a tax benefit that fully offset the tax accrued by the Company
on foreign dividends in the fourth quarter of fiscal year 2005. The current
tax benefit and the corresponding fourth quarter tax accrual had no cash
impact on the Company. Excluding the tax benefit described above, the
effective tax rate for the first quarter of fiscal year 2006 increased to
33.5% as compared to 32.8% in the first quarter of fiscal year 2005, mainly
due to higher effective foreign tax rates.
12. Retirement Plans
----------------
The components of net pension expense for the defined benefit plans were as
follows:
For the Three Months Ended
July 31,
---------------------------------------
(Dollars in thousands) 2005 2004
----------------- ----------------
Service Cost $2,829 $2,147
Interest Cost 2,942 2,653
Expected Return of Plan Assets (2,768) (2,268)
Net Amortization of Prior Service Cost and Unrecognized Transition Asset 127 148
Recognized Net Actuarial Loss 858 457
----------------- ----------------
Net Pension Expense $3,988 $3,137
================= ================
Pension plan contributions were $1.4 million and $1.3 million for the three
months ended July 31, 2005 and 2004, respectively.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS -
FIRST QUARTER ENDED JULY 31, 2005
Revenue for the first quarter of fiscal year 2006 of $236.7 million increased 4%
from $226.9 million in the prior year's first quarter. The first quarter revenue
increase was driven by year-on-year growth in the global STM business, with
non-subscription products, especially journal backfiles, subscription journals
and books contributing to these results. The U.S. P/T business also contributed
to the year-on-year growth with solid performances in business, education and
psychology. U.S. Higher Education revenue was flat with last year's first
quarter.
Gross profit margin for the first quarter was 67.6% compared to 66.9% in the
prior year's quarter. Improvements in U.S. P/T and STM product mix contributed
to the improvement. Operating and administrative expenses increased 5% over last
year's first quarter. The increase primarily reflects investments in technology
to deliver products to our customers, higher depreciation and increased
compensation partly due to the impact of the higher stock price on incentive
plans. In addition, we received a relocation incentive payment from the State of
New Jersey in the prior year period.
Operating income advanced 4% to $32.2 million in the first quarter of fiscal
year 2006, or 3% excluding foreign currency gains. Revenue, product mix and
lower inventory provisions drove the year-on-year growth. Operating margin was
flat compared to the prior year. Net interest expense and other increased $0.3
million primarily due to higher interest rates.
Excluding the tax benefit described in the non-GAAP financial disclosure below,
the effective tax rate for the first quarter of fiscal year 2006 increased to
33.5% as compared to 32.8% in the first quarter of fiscal year 2005, mainly due
to higher effective foreign tax rates.
Earnings per diluted share and net income for the first quarter of fiscal year
2006 were $0.46 and $27.9 million. Excluding the tax benefits associated with
the reversal of a tax accrual recorded on the repatriation of dividends from
European subsidiaries in the fourth quarter of fiscal year 2005, which is
described below, earnings per diluted share and net income for the first quarter
of fiscal year 2006 rose 6% to $0.34 and 2% to $20.4 million, respectively.
Non-GAAP Financial Measures: The Company's management evaluates operating
performance excluding unusual and/or nonrecurring events. The Company believes
excluding such events provides a more effective and comparable measure of
performance. Since adjusted net income and adjusted earnings per share are not
measures calculated in accordance with GAAP, they should not be considered as a
substitute for other GAAP measures, including net income and earnings per share
as indicators of operating performance.
Adjusted net income and adjusted earnings per diluted share excluding the tax
benefits are as follows:
Reconciliation of non-GAAP financial disclosure
-----------------------------------------------
Net Income (in millions) 2005 2004
-------------- --------------
As reported $27.9 $19.9
Tax benefit on dividends repatriated (7.5) -
-------------- --------------
Adjusted $20.4 $19.9
============== ==============
Earnings per Diluted Share 2005 2004
-------------- -------------
As reported $0.46 $0.32
Tax benefit on dividends repatriated (0.12) -
Adjusted $0.34 $0.32
============== =============
The Adjusted Net Income and Adjusted Earnings per Diluted Share above exclude
$7.5 million, or $0.12 per diluted share, of tax benefits associated with the
reversal of a tax accrual recorded on the repatriation of dividends from
European subsidiaries in the fourth quarter of fiscal year 2005. On May 10,
2005, the US Internal Revenue Service issued Notice 2005-38. The notice provided
for a tax benefit that fully offset the tax accrued by the Company on foreign
dividends in the fourth quarter of fiscal year 2005. The current tax benefit and
the corresponding fourth quarter tax accrual had no cash impact on the Company.
SEGMENT RESULTS
Professional/Trade (P/T)
- ------------------------
U.S. P/T revenue for the first quarter advanced 3% over prior year. Solid
results in business, education and psychology drove these results, partly offset
by higher sales return provisions and lower sales of consumer titles. Revenue
from the Company's recent acquisition of a global publisher of computer and
software information technology titles contributed approximately $1 million in
revenue for the quarter. Direct contribution to profit increased by 21% from the
prior year. Direct contribution margin increased 3.5% points to 24.0%,
principally due to gross margin improvement, reflecting product mix and lower
inventory and royalty provisions, as well as delayed advertising costs.
First quarter highlights include the publication of Dan Denning's The Bull
Hunter; Matthew Simmons' Twilight in the Desert, well-timed due to the recent
oil price increases and the book's focus on global oil supplies; and McKinsey &
Company's Valuation 4e, the best selling and most respected corporate valuation
title in the market, which is also packaged in a widely used university edition
with online course material.
Top consumer technology publications that were published during the quarter,
such as Peter Bauer's Photoshop CS2 For Dummies and Bob Levitus' Mac OS X Tiger
For Dummies, reflect the demand for books on recent major software releases. To
capitalize on the popularity of the Su Doku puzzle game, P/T published Andrew
Heron and Edmund James' Su Doku For Dummies in Europe and the U.S. Another
timely release during the quarter was the Tour de France For Dummies by Phil
Liggett, James Raia, and Sammarye Lewis, with a foreword by Lance Armstrong.
Several P/T titles received considerable attention from the media and customers.
Both The Bull Hunter and Twilight in the Desert hit The Wall Street Journal
Bestseller List. Other titles that were on national and regional bestseller
lists include Patrick Lencioni's Five Dysfunctions of a Team; the J.K. Lasser's
Income Tax Guide 2005; Michael Masterson's Automatic Wealth; Eric Tyson and Ray
Brown's Home Buying For Dummies; Eric Tyson's Investing For Dummies; and Sarah
Glendon Lyons and John E. Lucas' Mortgages For Dummies. The publicity
surrounding the May release of Jeffery Young's Icon: Steve Jobs, The Greatest
Second Act in the History of Business, continued to drive sales throughout the
first quarter.
On July 11, the Company acquired the publication rights to seven newsletters
from a leading provider of mental health and addiction information. Five of the
seven newsletters have long-standing editorial affiliations with Brown
University. On May 31, Wiley completed the acquisition of substantially all the
assets of a publisher of computer books and software specializing in IT business
certification materials. See Note 5 for further discussion of these
acquisitions.
Scientific, Technical, and Medical (STM)
- ----------------------------------------
U.S. STM revenue of $48.8 million increased 6% over last year's solid first
quarter. Non-subscription revenue, especially journal backfile sales,
contributed to the year-on-year growth. The STM subscription journals and book
programs performed well, as reflected in a 6% revenue increase over prior year.
Direct contribution to profit increased 10% in the quarter. The first quarter
direct contribution margin was 50.3% compared to 48.2% in the prior year. The
increase of 2.1% points primarily reflects favorable changes in product mix.
Globally, STM revenue increased approximately 6%, reflecting the combined effect
of robust journal and book sales.
In addition to healthy subscription journal license renewals, several new
Enhanced Access Licenses (EAL) were signed by academic and corporate customers
around the world. EAL customers enjoyed improved customer service due to a
number of system enhancements implemented during the quarter. Customers continue
to take advantage of Wiley InterScience's wide range of access options. During
the quarter, the number of visits to Wiley InterScience increased by
approximately 42% over prior year.
The growing value of Wiley's journals to the scientific community was evident in
the results of the recently announced 2004 ISI Impact Factor Analysis, an
independent ranking that measures how often a journal's articles are cited by
other researchers. Wiley journals exhibiting significant increases included the
Journal of Biomedical Materials Research, Catheterization and Cardiovascular
Intervention, Neurology and Urodynamics, Head and Neck, and American Journal of
Physical Anthropology.
In July, Wiley was among a group of major publishers and health organizations to
launch patientINFORM (www.patientinform.org), a free online information resource
that allows patients direct access to the latest medical research on some of the
most serious diseases and medical conditions. The service provides consumers
with access to the latest research articles published in medical and scientific
journals, assistance in interpreting the articles; and access to additional
materials on the web sites of participating voluntary health organizations.
The STM book program performed very well during the first quarter. Product
output was excellent and manuscript transmittals have been strong, reflecting
relatively favorable market conditions and increased use of online sales
channels. Global STM book revenue grew approximately 9%.
Higher Education
- ----------------
U.S. Higher Education revenue was essentially flat with that of the previous
year's first quarter. Growth in mathematics, science, and accounting was offset
by sluggish sales in the social sciences and engineering. The first quarter
direct contribution to profit increased 6% from the prior year. The first
quarter direct contribution margin increased 2.1% points to 37.4%, principally
due to lower sales returns, favorable product mix and lower royalty provisions.
An encouraging development has been the strong sales of Wiley PLUS (formerly
eGrade Plus). Available for sixty key titles, Wiley PLUS delivers to students
and instructors an integrated suite of resources (including an online version of
the textbook), that is organized in one easy-to-use website around teaching and
learning activities. Wiley PLUS allows instructors to customize course content,
create class presentations, assign homework and quizzes for automatic grading,
and track student progress. Sales of Wiley PLUS were significantly higher than
last year's first quarter, however this revenue is deferred and the majority
will be recognized over the course of the fall and spring semesters, i.e., the
second, third and fourth quarters of Wiley's fiscal year.
Wiley Higher Education offers students value by providing a wide variety of
product formats at different price points. Soon after the close of the quarter,
Wiley announced an agreement with VitalSource to support Wiley Desktop Editions,
which will provide downloadable e-text versions of leading Higher Education
textbooks directly from Wiley. These digital editions are intended for students
who want lower-priced versions of textbooks. The Company also signed an
agreement with Quizdom to distribute radio frequency clickers to universities
that adopt Wiley learning materials. The clicker system facilitates two-way
communication between instructors and students, facilitating classroom
administration, accountability, and assessment.
Europe
- ------
Wiley Europe's first quarter revenue of $63.1 million was up 6% over the prior
year. STM journals and reference books drove the revenue growth. In addition,
revenue from the Company's initial sales of German publications under the Fur
Dummies brand contributed $0.4 million to the growth. Direct contribution to
profit was essentially flat with the prior year. Direct contribution margin
decreased 1.9% points principally due to product mix.
Wiley Europe renewed its contract with the Quaternary Research Association to
publish The Journal of Quaternary Research. A new controlled circulation
magazine, Spectroscopy Asia, was successfully launched in May. During the
quarter, the Company published the Dictionary of Microscopy. The dictionary is a
brand extension of the Microscopy & Analysis controlled-circulation magazine,
which was acquired last year.
Wiley Europe's For Dummies program continued to gain momentum. The release of Su
Doku For Dummies is taking advantage of the numbers puzzle craze. More than
forty translated and three indigenous Fur Dummies titles are on the market in
Germany and selling briskly. Wiley-VCH is also capitalizing on the centenary of
Albert Einstein's theory of relativity by publishing Renn/Einstein Essays (in
German and English), as well as Renn/Einstein Katalog.
Asia, Australia, and Canada
- ---------------------------
Wiley's revenue in Asia, Australia, and Canada was up 3% during the first
quarter. Excluding the effect of foreign exchange, revenue declined 2%. Sluggish
performance in Canada was partially offset by growth in Asia. Direct
contribution to profit was essentially flat with the prior year.
P/T books performed particularly well in India, China, Thailand, and the
Phillipines. Wiley Asia's P/T list picked up interest globally. For example, the
revised edition of Richard Duncan's The Dollar Crisis (originated in Asia) is
being adopted as a textbook for finance courses and is being used as the basis
for a seminar by Rich Dad, Poor Dad author Robert Kiyosaki.
In Australia, Higher Education and School revenue was strong while P/T lagged
behind due to a subdued retail environment. Wiley Australia expects to benefit
from a strong pipeline of P/T publications for the holiday season. Wiley
Australia was named Secondary Publisher of the Year at the Australian Awards for
Excellence in Educational Publishing for the sixth consecutive year. Recognizing
overall excellence, the award was granted by a panel of judges that included
booksellers, teachers, and publishers.
Wiley's Higher Education products in Canada were down for the quarter. Revenue
in Canada from professional and consumer titles fell short, although for the
first time, a Wiley Canada title, Real Estate Investing in Canada, hit #1 on a
national non-fiction bestseller list.
Shared Services and Administrative Costs
- ----------------------------------------
Shared services and administrative costs for the first quarter increased 11% to
$50.1 million. The increase is primarily attributable to planned increases in
investments in technology to deliver products to our customers, higher
depreciation and increased compensation costs partly due to the impact of the
significantly higher stock price on incentive plans. In addition, we received a
relocation incentive payment from the State of New Jersey in the prior year
period.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents balance was $13.1 million at the end of
the first quarter 2006, compared with $40.4 million a year earlier. Cash used by
operating activities in fiscal year 2006 was $29.0 million compared with $6.3
million in the prior year. The additional use of cash was mainly the result of
lower cash receipts from EAL subscriptions due to successful collection efforts
in the last quarter of the prior year. In addition, income tax refunds received
in the prior year period, increased accounts receivable due primarily to higher
book sales and the timing of payments for certain operating expenses contributed
to the use of operating cash. The increase in accounts receivable since April
30, 2005 is due to the seasonality of the Higher Education business.
Cash used for investing activities for the first quarter 2006 was $23.0 million
compared to $22.5 million in the prior year. The Company invested $15.4 million
in acquisitions of publishing assets and rights compared to $5.7 million in the
prior year. The current year acquisitions included the purchase of substantially
all the assets of a global publisher of computer books and software specializing
in IT business certification materials for $12.5 million, including related
acquisition costs. In addition, the Company acquired rights to a newsletter
publishing division of a leading publisher of mental health and addiction
information for $1.4 million, plus liabilities assumed. Projected product
development and property, equipment and technology capital spending for fiscal
year 2006 is forecast to be approximately $70 million and $35 million,
respectively.
Increased cash used for investments in product development were partly offset by
lower spending on property, plant and equipment. The Company sold $10 million of
marketable securities during the current quarter consisting of shares of
variable rate securities issued by closed-end funds.
Cash used for financing activities was $24.0 million in the first quarter of
fiscal 2006, as compared to $12.9 million in the prior period. Current year
financing activities included the continuation of the Company's stock repurchase
program.
During the first quarter ending on July 31, 2005 the Company purchased the
following Common Stock under its stock repurchase program. The program was
approved by the Company's Board of Directors and publicly announced in December
2002.
Number of Average New Repurchase Maximum Shares Yet
Month Shares Price Paid Program Approved to be Purchased Under
Purchased Per Share the Repurchase Plans
- -------------------------------------------------------------------------------------
May 246,500 $37.26 651,600
June 31,600 $37.90 4,000,000 4,620,000
July 264,000 $41.41 4,356,000
- -------------------------------------------------------------------------------------
Total 542,100 $39.32
In June 2005 the Board of Directors approved a new program to repurchase up to 4
million additional shares of Class A and B Common stock upon completion of the
existing program. The Company increased its quarterly dividend to shareholders
by 20% to $0.090 per share versus $0.075 per share in the prior year. During the
quarter, the Company borrowed $50.0 million under its revolving credit facility
to repay $50.0 million of the outstanding term loan facility in advance of the
scheduled due date.
The Company believes its cash balances together with existing credit facilities
are sufficient to meet its obligations. At July 31, 2005 the Company had $192.5
of variable rate loans outstanding and approximately $135.0 million of unused
borrowing capacity available under its revolving credit facilities and other
short-term lines of credit. The final payment on the variable rate term loan is
due September 2006. The Company has the ability and intent to refinance its
credit facilities, which is planned to be completed by the end of fiscal 2006.
"Safe Harbor" Statement under the
Private Securities Litigation Reform Act of 1995
- ------------------------------------------------
This report contains certain forward-looking statements concerning the Company's
operations, performance, and financial condition. Reliance should not be placed
on forward-looking statements, as actual results may differ materially from
those in any forward-looking statements. Any such forward-looking statements are
based upon a number of assumptions and estimates that are inherently subject to
uncertainties and contingencies, many of which are beyond the control of the
Company, and are subject to change based on many important factors. Such factors
include, but are not limited to (i) the level of investment in new technologies
and products; (ii) subscriber renewal rates for the Company's journals; (iii)
the financial stability and liquidity of journal subscription agents; (iv) the
consolidation of book wholesalers and retail accounts; (v) the market position
and financial stability of key online retailers; (vi) the seasonal nature of the
Company's educational business and the impact of the used book market; (vii)
worldwide economic and political conditions; and (viii) the Company's ability to
protect its copyrights and other intellectual property worldwide (ix) other
factors detailed from time to time in the Company's filings with the Securities
and Exchange Commission. The Company undertakes no obligation to update or
revise any such forward-looking statements to reflect subsequent events or
circumstances.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risk
The Company is exposed to market risk primarily related to interest rates,
foreign exchange and credit risk. It is the Company's policy to monitor these
exposures and to use derivative financial instruments and/or insurance contracts
from time to time to reduce fluctuations in earnings and cash flows when it is
deemed appropriate to do so. The Company does not use derivative financial
investments for trading or speculative purposes. The Company did not hold any
derivative financial instruments during the first quarter of fiscal year 2006.
Interest Rates
The Company had $192.5 million of variable rate loans outstanding at July 31,
2005, which approximated fair value. The Company did not use any derivative
financial investments to manage this exposure. The weighted average interest
rate as of July 31, 2005 was approximately 4.03%. A hypothetical 1% change in
interest rates for the variable rate debt would affect annual net income and
cash flow by approximately $1.3 million.
Foreign Exchange Rates
Under certain circumstances, the Company enters into derivative financial
instruments in the form of forward contracts as a hedge against foreign currency
fluctuation of specific transactions, including inter-company purchases.
Customer Credit Risk
The Company's business is not dependent upon a single customer; however, the
industry has experienced a significant concentration in national, regional, and
online bookstore chains in recent years. Although no one book customer accounts
for more than 5% of total consolidated revenue, the top 10 book customers
account for approximately 25% of total consolidated revenue and approximately
47% of total gross trade accounts receivable at April 30, 2005.
In the journal publishing business, subscriptions are primarily sourced through
journal subscription agents who, acting as agents for library customers,
facilitate ordering by consolidating the subscription orders/billings of each
subscriber with various publishers. Cash is generally collected in advance from
subscribers by the subscription agents and is remitted to the journal publisher,
including the Company, generally prior to the commencement of the subscriptions.
Although at fiscal year-end the Company had minimal credit risk exposure to
these agents, future calendar-year subscription receipts from these agents are
highly dependent on their financial condition and liquidity. Subscription agents
account for approximately 23% of total consolidated revenue and no one agent
accounts for more than 6% of total consolidated revenue. Insurance for these
accounts is not commercially feasible and/or available.
ITEM 4. CONTROLS AND PROCEDURES
The Company maintains disclosure controls and procedures designed to ensure that
information required to be disclosed in reports filed or submitted under the
Securities Exchange Act of 1934, as amended, is recorded, processed, summarized
and reported within the time periods specified by the Securities and Exchange
Commission's rules and regulations. The Company's Chief Executive Officer and
Chief Financial Officer, together with the Chief Accounting Officer and other
members of the Company's management, have conducted an evaluation of these
disclosure controls and procedures as of a date within 90 days prior to the date
of filing this report. Based on this evaluation, the Chief Executive Officer and
Chief Financial Officer have concluded that the Company's disclosure controls
and procedures are effective. There were no significant changes in the Company's
internal controls or in other factors that could significantly affect such
internal controls subsequent to this evaluation.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
99.1 - 18 U.S.C. Section 1350 Certificate by the President and
Chief Executive Officer
99.2 - 18 U.S.C. Section 1350 Certificate by the Chief Financial
and Operations Officer
10.19 - Fiscal Year 2006 Qualified Executive Long Term Incentive Plan
(filed as an exhibit to the Company's Report on this Form
10-Q).
10.20 - Fiscal Year 2006 Qualified Executive Annual Incentive Plan
(filed as an exhibit to the Company's Report on this Form
10-Q).
10.21 - Fiscal Year 2006 Executive Annual Strategic Milestones
Incentive Plan (filed as an exhibit to the Company's Report
on this Form 10-Q).
(b) The following reports on Form 8-K were furnished to the Securities and
Exchange Commission since the filing of the Company's 10-K on July 11,
2005.
i. Earnings release on the first quarter fiscal 2005 results issued
on form 8-K dated September 8, 2005 which include the condensed
financial statements of the Company.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized
JOHN WILEY & SONS, INC.
Registrant
By /s/ William J. Pesce
------------------------------------
William J. Pesce
President and
Chief Executive Officer
By /s/ Ellis E. Cousens
------------------------------------
Ellis E. Cousens
Executive Vice President and
Chief Financial & Operations Officer
By /s/ Edward J. Melando
------------------------------------
Edward J. Melando
Vice President, Controller and
Chief Accounting Officer
Dated: September 9, 2005
CERTIFICATIONS PERSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
------------------------------------------------------------------------
I, William J. Pesce, certify that:
I have reviewed this quarterly report on Form 10-Q of John Wiley & Sons, Inc.;
- - Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report; and
- - Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented.
- - The Company's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f) for the Company and we have:
a. Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
Company, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this report is being prepared;
b. Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the Company's disclosure controls
and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as
of the end of the period covered by this report, based on such
evaluation; and
d. Disclosed in this report any change in the Company's internal
control over financial reporting that occurred during the
Company's most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the
Company's internal control over financial reporting.
- - The Company's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
Company's auditors and the audit committee of the board of directors:
a. all significant deficiencies and material weaknesses in the
design or operation of internal controls over financial reporting
that are reasonably likely to adversely affect the Company's
ability to record, process, summarize and report financial
information; and
b. any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls.
By /s/ William J. Pesce
-------------------------
William J. Pesce
President and
Chief Executive Officer
Dated: September 9, 2005
I, Ellis E. Cousens, certify that:
I have reviewed this quarterly report on Form 10-Q of John Wiley & Sons, Inc.;
- - Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report; and
- - Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented
- - The Company's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f) for the Company and we have:
a. Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
Company, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this report is being prepared;
b. Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the Company's disclosure controls
and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as
of the end of the period covered by this report, based on such
evaluation; and
d. Disclosed in this report any change in the Company's internal
control over financial reporting that occurred during the
Company's most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the
Company's internal control over financial reporting.
- - The Company's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
Company's auditors and the audit committee of the board of directors:
a. all significant deficiencies and material weaknesses in the
design or operation of internal controls over financial reporting
that are reasonably likely to adversely affect the Company's
ability to record, process, summarize and report financial
information; and
b. any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls.
By /s/ Ellis E. Cousens
------------------------------------
Ellis E. Cousens
Executive Vice President and
Chief Financial & Operations Officer
Dated: September 9, 2005
Exhibit 99.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of John Wiley & Sons, Inc. (the
"Company") on Form 10-Q for the period ending July 31, 2005 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, William
J. Pesce, President and Chief Executive Officer of the Company, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that based on my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15
(d) of the Securities Exchange Act of 1934 (as amended), as
applicable; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
/s/William J. Pesce
- ------------------------
William J. Pesce
President and
Chief Executive Officer
Dated: September 9, 2005
Exhibit 99.2
CERTIFICATION PURSUANT TO
18 .S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of John Wiley & Sons, Inc. (the
"Company") on Form 10-Q for the period ending July 31, 2005 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Ellis
E. Cousens, Executive Vice President and Chief Financial & Operations Officer of
the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that based on my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15
(d) of the Securities Exchange Act of 1934 (as amended), as
applicable; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
/s/Ellis E. Cousens
- ------------------------------------
Ellis E. Cousens
Executive Vice President and
Chief Financial & Operations Officer
Dated: September 9, 2005
Exhibit 10.19
JOHN WILEY & SONS, INC.
-----------------------
FY 2006 QUALIFIED EXECUTIVE LONG TERM INCENTIVE PLAN
----------------------------------------------------
PLAN DOCUMENT
-------------
CONFIDENTIAL
------------
MAY 1, 2005
-----------
CONTENTS
--------
Section Subject Page
- ------- ------- ----
I. Definitions 2
II. Plan Objectives 3
III. Eligibility 3
IV. Performance Targets and Measurement 3
V. Performance Evaluation 3
VI. Restricted Performance Shares Award Provisions 4
VII. Stock Options 5
VIII. Payouts 5
IX. Administration and Other Matters 5
I. DEFINITIONS
--------------
Following are definitions for words and phrases used in this document. Unless
the context clearly indicates otherwise, these words and phrases are considered
to be defined terms and appear in this document in italicized print:
Company: John Wiley & Sons, Inc.
business unit: The Company, a business or subsidiary of the Company, or a global
unit of the Company.
plan: This FY 2006 Qualified Executive Long Term Incentive Plan.
shareholder plan: The Company's 2004 Key Employee Stock Plan.
plan period: The three year period from May 1, 2005 to April 30, 2008, or a
portion of this period, at the discretion of the CC.
Compensation Committee (CC): The committee of the Company's Board of Directors
responsible for the review and approval of executive compensation.
performance target: A participant's objective to achieve specific financial
goals for the plan period, as approved by the CC. A performance target comprises
all of the financial goals for a business unit.
business criteria: An indicator of financial performance, chosen from the
business criteria listed in Section 7(b)(ii)(B) of the shareholder plan. The
following business criteria are used in this plan:
cumulative cash: flow The cumulative for the plan period of net income,
excluding unusual items not related to the period being measured,
plus/minus any non-cash items included in net income and changes in
operating assets and liabilities, minus normal investments in product
development assets and property and equipment.
earnings per share: Earnings per share, excluding unusual items not related
to the period being measured. Actual results shall be increased by one cent
for VCH tax basis step-up recovery.
financial goal: A targeted level of attainment of a given business criteria.
financial results: The published, audited financial results of the Company.
participant: A person selected to participate in the plan.
performance levels:
threshold: The minimum acceptable level of achievement of a financial goal
in order to earn a payout, expressed as a percentage of target ( e.g., 95%
of target.)
target: Achievement of the assigned financial goal-100%.
outstanding: Superior achievement of a financial goal, earning the maximum
payout, expressed as a percentage of target (e.g., 115% of target.)
target incentive: A targeted number of restricted performance shares that a
participant is eligible to receive if 100% of his/her applicable award period
objectives are achieved and the participant remains employed by the Company
through April 30, 2010, except as otherwise provided in Section VIII.
stock: Class A Common Stock of the Company.
restricted performance share: A share of stock issued pursuant to this plan and
the shareholder plan that is subject to forfeiture. In the shareholder plan,
such stock is referred to as "Performance-Based Stock."
restricted period: The period during which the restricted performance shares
shall be subject to forfeiture in whole or in part, as defined in the
shareholder plan, in accordance with the terms of the award.
plan-end adjusted restricted performance shares award: The number of restricted
performance shares awarded to a participant at the end of the plan cycle after
adjustments, if any, are made, as set forth in Sections V and VIII.
II. PLAN OBJECTIVES
-------------------
The plan is intended to provide the officers and other key colleagues of the
Company and of its subsidiaries, affiliates and certain joint venture companies,
upon whose judgment, initiative and efforts the Company depends for its growth
and for the profitable conduct of its business, with additional incentive to
promote the success of the Company.
III. ELIGIBILITY
----------------
A participant is selected by the CEO and recommended for participation to the
CC, which has sole discretion for determining eligibility, from among those
colleagues in key management positions deemed able to make the most significant
contributions to the growth and profitability of the Company. The President and
CEO of the Company is a participant.
IV. PERFORMANCE TARGETS AND MEASUREMENT
---------------------------------------
The CEO recommends and the CC adopts, in its sole discretion, performance
targets and performance levels for each participant, not later than 90 days from
the commencement of the plan period. No performance target or performance level
may be modified after 90 days from the commencement of the plan period.
A. Performance targets, comprising one or more financial goals, are defined
for each business unit. Each financial goal is assigned a weight, such that
the sum of the weights of all financial goals for a business unit equals
100%.
B. Each participant is assigned performance targets for one or more business
units, based on the participant's position, responsibilities, and his
ability to affect the results of the assigned business unit. For each
participant, each business unit is assigned a weight, such that the sum of
the weights of all business units for a participant equals 100 percent.
Collectively, all business unit performance targets constitute the
participant's plan period objectives.
C. Each financial goal is assigned performance levels (threshold, target and
outstanding).
V. PERFORMANCE EVALUATION
-------------------------
A. Financial Results
-----------------
1. At the end of the plan period, the financial results for each business
unit are compared with that unit's financial goals to determine the
payout for each participant.
2. In determining the attainment of financial goals, the impact of any of
the events (a) through (i) listed in Section 7(b)(ii)(B) of the
shareholder plan, if dilutive (causes a reduction in the financial
result) will be excluded from the financial results for any affected
business unit.
3. Award Determination
a. Achievement of threshold performance of at least one financial
goal of a performance target is necessary for a participant to
receive a payout for that performance target.
b. The unweighted payout factor for each financial goal is
determined as follows:
1. For performance below the threshold level, the payout factor
is zero.
2. For performance at the threshold level, the payout factor is
25%.
3. For performance between the threshold and target levels, the
payout factor is between 25% and 100%, determined on a
pro-rata basis.
4. For performance at the target level, the payout factor is
100%.
5. For performance between the target and outstanding levels,
the payout factor is between 100% and 200%, determined on a
pro-rata basis.
6. For performance at or above the outstanding level, the
payout factor is 200 percent.
c. A participant's plan-end adjusted restricted performance shares
award is determined as follows:
1. Each financial goal's unweighted payout factor determined
above times the weighting of that financial goal equals the
weighted payout factor for that financial goal
2. The sum of the weighted payout factors for a business unit's
performance target equals the payout factor for that
performance target.
3. The participant's target incentive
times
the business unit weight
times
the performance target payout factor
equals
the participant's payout for that business unit
4. The sum of the payouts for all the business units assigned
to a participant equals the participant's total plan-end
adjusted restricted performance shares award.
d. The CC may, in its sole discretion, reduce a participant's payout
to any level it deems appropriate.
VI. RESTRICTED PERFORMANCE SHARES AWARD PROVISIONS
--------------------------------------------------
A. Restricted performance shares, equal to a participant's target incentive,
shall be determined at the beginning of the plan period. In addition to the
terms and conditions set forth in the shareholder plan, the restricted
period for the plan-end adjusted restricted performance shares award shall
be as follows: subject to continued employment except as otherwise set
forth in the shareholder plan, the lapse of restrictions on one-half of the
restricted performance shares awarded will occur on the first anniversary
of the plan period end date (April 30, 2009) at which time the participant
will receive a stock certificate in a number of shares equal to one-half of
the restricted performance shares awarded with the restrictive legend
deleted, and the lapse of restrictions on the remaining half will occur on
the second anniversary of the plan period end date (April 30, 2010) at
which time the participant will receive a new stock certificate in a number
of shares equal to the remaining half with the restrictive legend deleted.
B. The plan-end adjusted restricted performances share award will be compared
to the restricted performance shares targeted at the beginning of the plan
period, and the appropriate amount of restricted performance shares will be
awarded or forfeited, as required, to bring the restricted performance
shares award to the number of shares designated as the plan-end adjusted
restricted performance shares award.
VII. STOCK OPTIONS
------------------
The participant may be granted a stock option pursuant to the shareholder plan
at the beginning of the plan period, representing another incentive vehicle by
which the participant is able to share in the equity growth of the Company. The
terms and conditions of the award of the stock option are contained in the
shareholder plan and in the stock option award.
VIII. PAYOUTS
-------------
A. Plan-end adjusted restricted performances share awards will be made
within 90 days after the end of the plan period.
B. In the event of a participant's death, disability, retirement or leave
of absence prior to the plan-end adjusted restricted performances
share award being earned, the award, if any, will be determined by the
CC.
C. A participant who resigns, or whose employment is terminated by the
Company, with or without cause before the award is earned, will not
receive an award. Exception to this provision shall be made with the
approval of the CC, in its sole discretion.
D. In the event of a Change of Control, as that term is defined in the
shareholder plan, all "target" restricted performance shares vest to
the participant, or at the CC's option, payment will be made of the
value of the "target" restricted performance shares based on the fair
market value on the effective date of the Change of Control.
E. A participant who is hired or promoted into an eligible position
during the plan period may receive a prorated plan-end adjusted
restricted performances share award as determined by the CC, in its
sole discretion.
IX. ADMINISTRATION AND OTHER MATTERS
------------------------------------
A. The plan will be administered by the CC, which shall have authority in
its sole discretion to interpret and administer this plan, including,
without limitation, all questions regarding eligibility and status of
any participant, and no participant shall have any right to receive a
payout or payment of any kind whatsoever, except as determined by the
CC hereunder.
B. The Company will have no obligation to reserve or otherwise fund in
advance any amount which may become payable under the plan.
C. This plan may not be modified or amended except with the approval of
the CC, in accordance with the provisions of the shareholder plan.
D. In the event of a conflict between the provisions of this plan and the
provisions of the shareholder plan, the provisions of the shareholder
plan shall apply.
E. No awards of any type under this plan shall be considered as
compensation for purposes of defining compensation for retirement,
savings or supplemental executive retirement plans, or any other
benefit.
Exhibit 10.20
JOHN WILEY & SONS, INC.
-----------------------
FY 2006 QUALIFIED EXECUTIVE ANNUAL INCENTIVE PLAN
-------------------------------------------------
PLAN DOCUMENT
-------------
CONFIDENTIAL
------------
MAY 1, 2005
-----------
CONTENTS
--------
Section Subject Page
- ------- ------- ----
I. Definitions 2
II. Plan Objectives 3
III. Eligibility 3
IV. Performance Targets and Measurement 3
V. Performance Evaluation 4
VI. Payouts 5
VII. Administration and Other Matters 5
I. DEFINITIONS
--------------
Following are definitions for words and phrases used in this document. Unless
the context clearly indicates otherwise, these words and phrases are considered
to be defined terms and appear in this document in italicized print:
Company: John Wiley & Sons, Inc.
business unit: The Company, a business or subsidiary of the Company, or a global
unit of the Company.
plan: This FY 2006 Qualified Executive Annual Incentive Plan.
shareholder plan: The Company's 2004 Executive Annual Incentive Plan.
plan period: The twelve-month period from May 1, 2005 to April 30, 2006, or a
portion of this period, at the discretion of the CC.
Compensation Committee (CC): The committee of the Company's Board of Directors
responsible for the review and approval of executive compensation.
performance target: A participant's objective to achieve specific financial
goals for the plan period, as approved by the CC. A performance target comprises
all of the financial goals for a business unit.
business criteria: An indicator of financial performance, chosen from the
business criteria listed in Section 4(b)(ii) of the shareholder plan. The
following business criteria are used in this plan:
revenue: (corporate) Gross annual revenue, net of provision for returns.
cash flow: Net income, excluding unusual items not related to the period
being measured, plus/minus any non-cash items included in net income and
changes in operating assets and liabilities, minus normal investments in
product development assets and property and equipment.
earnings per share: Earnings per share, excluding unusual items not related
to the period being measured. Actual results shall be increased by one cent
for VCH tax basis step-up recovery.
revenue: (business) Gross annual revenue, net of actual returns.
business EBITA: Operating income before amortization of intangibles.
business cash flow: business operating income, plus/minus any non-cash
items included in business operating income (other than provisions for bad
debts), and changes in controllable assets and liabilities, less normal
investments in product development assets and direct property and equipment
additions. Controllable assets and liabilities are inventory, composition,
author advances, other deferred publication costs, and deferred
subscription revenues.
GPC EBITA: business operating income before amortization of intangibles as
adjusted for profit earned by other businesses on intercompany
transactions.
GPC cash flow: business cash flow as adjusted for the profit earned by
other businesses on intercompany transactions.
financial goal: A targeted level of attainment of a given business criteria.
financial results: The published, audited financial results of the Company and
the business financial results derived therefrom.
participant: A person selected to participate in the plan.
performance levels:
threshold: The minimum acceptable level of achievement of a financial goal
in order to earn a payout, expressed as a percentage of target ( e.g., 95%
of target.)
target: Achievement of the assigned financial goal-100%.
outstanding: Superior achievement of a financial goal, earning the maximum
payout, expressed as a percentage of target (e.g., 115% of target.)
base salary: A participant's base salary as of July 1, 2005, or the date of hire
or promotion into the plan, if later, adjusted for any amount of time the
participant may not be in the plan for reasons of hire, death, disability,
retirement and/or termination.
payout: Actual gross dollar amount paid to a participant under the plan, if any,
for achievement of assigned performance targets, as further discussed in this
plan.
total annual incentive opportunity: The total target amount that a participant
is eligible to receive from all annual incentive plans, including this plan.
target incentive percent: The percent applied to the participant's total annual
incentive opportunity to determine the target incentive amount for this plan.
Generally, for the plan period 2006, the target incentive percent for this plan
is 75%.
target incentive amount: The amount that a participant is eligible to receive if
he/she achieves 100% of his/her performance target for a business unit. The sum
of the target incentive amounts for all business units assigned to a participant
is the total target incentive amount.
II. PLAN OBJECTIVES
-------------------
The plan is intended to provide the officers and other key colleagues of the
Company and of its subsidiaries, affiliates and certain joint venture companies,
upon whose judgement, initiative and efforts the Company depends for its growth
and for the profitable conduct of its business, with additional incentive to
promote the success of the Company.
III. ELIGIBILITY
----------------
A participant is selected by the CEO and recommended for participation to the
CC, which has sole discretion for determining eligibility, from among those
colleagues in key management positions deemed able to make the most significant
contributions to the growth and profitability of the Company. The President and
CEO of the Company is a participant.
IV. PERFORMANCE TARGETS AND MEASUREMENT
---------------------------------------
The CEO recommends and the CC adopts, in its sole discretion, performance
targets and performance levels for each participant, not later than 90 days from
the commencement of the plan period. No performance target or performance level
may be modified after 90 days from the commencement of the plan period.
A. Performance targets, comprising one or more financial goals, are
defined for each business unit. Each financial goal is assigned a
weight, such that the sum of the weights of all financial goals for a
business unit equals 100%.
B. Each participant is assigned performance targets for one or more
business units , based on the participant's position,
responsibilities, and his ability to affect the results of the
assigned business unit. For each participant, each business unit is
assigned a weight, such that the sum of the weights of all business
units for a participant equals 100%. Collectively, all business unit
performance targets constitute the participant's plan period
objectives.
C. Each financial goal is assigned performance levels (threshold, target
and outstanding).
V. PERFORMANCE EVALUATION
-------------------------
A. Financial Results
-----------------
1. At the end of the plan period, the financial results for each business
unit are compared with that unit's financial goals to determine the
payout for each participant.
2. In determining the attainment of financial goals,
a. the impact of foreign exchange gains or losses will be excluded
from revenue and business EBITA and business cash flow criteria.
b. the impact of any of the events (1) through (9) listed in Section
4(b)(ii) of the shareholder plan, if dilutive (causes a reduction
in the financial result), will be excluded from the financial
results of any affected business unit.
3. Award Determination
a. Achievement of threshold performance of at least one financial
goal of a performance target is necessary for a participant to
receive a payout for that performance target.
b. The unweighted payout factor for each financial goal is
determined as follows:
1. For performance below the threshold level, the payout factor
is zero.
2. For performance at the threshold level, the payout factor is
25%.
3. For performance between the threshold and target levels, the
payout factor is between 25% and 100%, determined on a
pro-rata basis.
4. For performance at the target level, the payout factor is
100%.
5. For performance between the target and outstanding levels,
the payout factor is between 100% and 200%, determined on a
pro-rata basis.
6. For performance at or above the outstanding level, the
payout factor is 200 percent.
c. A participant's payout is determined as follows:
1. Each financial goal's unweighted payout factor determined
above times the weighting of that financial goal equals the
weighted payout factor for that financial goal.
2. The sum of the weighted payout factors for a business unit's
performance target equals the payout factor for that
performance target.
3. The participant's total annual incentive opportunity
times
the participant's target incentive percent
times
the business unit weight
times
the performance target payout factor
equals
the participant's payout for that business unit
4. The sum of the payouts for all the business units assigned
to a participant equals the participant's total payout.
d. The CC may, in its sole discretion, reduce a participant's payout
to any level it deems appropriate.
VI. PAYOUTS
-----------
A. Payouts will be made within 90 days after the end of the plan period.
B. In the event of a participant's death, disability, retirement or leave of
absence prior to payout from the plan, the payout, if any, will be
determined by the CC.
C. A participant who resigns, or whose employment is terminated by the
Company, with or without cause, before payout from the plan is distributed,
will not receive a payout. Exception to this provision shall be made with
the approval of the CC, in its sole discretion.
D. A participant who is hired or promoted into an eligible position during the
plan period may receive a prorated payout as determined by the CC, in its
sole discretion.
VII. ADMINISTRATION AND OTHER MATTERS
-------------------------------------
A. The plan will be administered by the CC, which shall have authority in its
sole discretion to interpret and administer this plan, including, without
limitation, all questions regarding eligibility and status of any
participant, and no participant shall have any right to receive a payout or
payment of any kind whatsoever, except as determined by the CC hereunder.
B. The Company will have no obligation to reserve or otherwise fund in advance
any amount which may become payable under the plan.
C. This plan may not be modified or amended except with the approval of the
CC, in accordance with the provisions of the shareholder plan.
D. In the event of a conflict between the provisions of this plan and the
provisions of the shareholder plan, the provisions of the shareholder plan
shall apply.
Exhibit 10.21
JOHN WILEY & SONS, INC.
-----------------------
FY 2006 EXECUTIVE ANNUAL STRATEGIC MILESTONES INCENTIVE PLAN
------------------------------------------------------------
ADMINISTRATIVE DOCUMENT
-----------------------
CONFIDENTIAL
------------
MAY 1, 2005
-----------
CONTENTS
--------
Section Subject Page
- ------- ------- ----
I. Definitions 2
II. Plan Objectives 3
III. Eligibility 3
IV. Performance Objectives and Measurement 3
V. Performance Evaluation 3
VI. Payouts 4
VII. Administration and Other Matters 5
I. DEFINITIONS
--------------
Following are definitions for words and phrases used in this document. Unless
the context clearly indicates otherwise, these words and phrases are considered
to be defined terms and appear in this document in italicized print:
company: John Wiley & Sons, Inc.
plan: The company's Fiscal Year 2006 Executive Annual Strategic Milestones
Incentive Plan described in this document and any written amendments to this
document.
plan year: The twelve month period from May 1, 2005 to April 30, 2006.
Compensation Committee (CC): The committee of the company's Board of Directors
(Board) responsible for reviewing executive compensation.
strategic milestone: A participant's objective to achieve specific results for
FY 2006, including interim revised strategic milestones, if any, as approved and
communicated in writing, as described in Sections IV and V below. Strategic
milestones are leading indicators of performance.
participant: A person selected to participate in the plan.
base salary: The participant's base salary as of July 1, 2005, or the date of
hire or promotion into the plan, if later, adjusted for any increases or
decreases during FY 2006, on a prorated basis and adjusted for any amount of
time the participant may not be in the plan for reasons of hire, death,
disability, retirement and/or termination.
payout: Actual gross dollar amount paid to a participant under the plan, if any,
for achievement of strategic milestones, as further discussed in this plan.
total annual incentive opportunity: The total target amount a participant is
eligible to receive from all annual incentive programs, including this plan.
target incentive percent: The percent applied to the participant's total annual
incentive opportunity to determine the target incentive amount for the plan.
Generally, for the plan year 2006, the target incentive percent is 25%.
target incentive amount: The amount, if any, that a participant is eligible to
receive if he/she achieves 100% of his/her strategic milestones.
summary evaluation levels:
threshold: The minimum acceptable level of achievement of strategic
milestones. If threshold performance is achieved against all strategic
milestones, a participant may earn 25% of the target incentive amount for
which he/she is eligible.
target: Achievement in aggregate of target strategic milestones. Each
individual strategic milestone is set at a level that is both challenging
and achievable. If target performance is achieved against all strategic
milestones, a participant may earn 100% of the target incentive amount for
which he/she is eligible.
outstanding: Superior achievement of strategic milestones, both in quality
and scope, with limited time and resources. If outstanding performance is
achieved against strategic milestones, the maximum amount a participant may
earn is 200% of the target incentive amount for which he/she is eligible.
payout factor: Percentage of strategic milestones deemed achieved, applied to
the target incenive amount, used to determine the payout for which a participant
is eligible.
II. PLAN OBJECTIVES
-------------------
The purpose of the FY 2006 Executive Annual Strategic Milestones Incentive Plan
is to enable the company to reinforce and sustain a culture devoted to excellent
performance, reward significant contributions to the success of Wiley, and
attract and retain highly qualified executives.
III. ELIGIBILITY
----------------
The participant is selected by the President and CEO of the company, from among
those colleagues in key management positions deemed able to make the most
significant contributions to the growth and profitability of the company, with
the approval of the CC. The President and CEO of the company is a participant.
IV. PERFORMANCE OBJECTIVES AND MEASUREMENT
------------------------------------------
A. Strategic milestones are non-financial individual objectives over which the
participant has a large measure of control, which lead to, or are expected
to lead to, improved performance for the company in the future. Strategic
milestones are determined near the beginning of the plan year by the
participant, and approved by CEO or the participant's manager, if the CEO
is not the participant's manager.
B. The strategic milestones for the President and CEO are reviewed and
approved by the CC.
C. The strategic milestones for the President and CEO should be appropriately
reflected in those of all other colleagues at all levels. Each participant
collaborates with his/her manager in setting strategic milestones. The
strategic milestones may be revised during the plan year, as appropriate.
D. The determination of strategic milestones includes defining a target level
of performance and the measure of such, and may include defining threshold
and outstanding levels of performance and the measures of such.
V. PERFORMANCE EVALUATION
-------------------------
A. Achievement of a participant's strategic milestones will be determined at
the end of the plan year by comparing results achieved to previously set
objectives.
B. Each participant's manager will recommend a summary evaluation level and a
payout factor for achievement of all strategic milestones, by comparing
results achieved to the previously set objectives. In determining the
payout factor, the overall performance on all strategic milestones will be
considered. The CEO will recommend to the CC for approval the payout
factors for all other participants. The CC will approve the payout factor
for the CEO.
Summary evaluation levels and related payout factors are as follows:
----------------------------------------------------
Summary Evaluation Payout factor range
----------------------------------------------------
< Threshold 0
----------------------------------------------------
Threshold 25% - <35%
----------------------------------------------------
> Threshold =>35% - <50%
----------------------------------------------------
< Target =>50% - <90%
----------------------------------------------------
Target =>90% - <=110%
----------------------------------------------------
> Target >110% - <150%
----------------------------------------------------
< Outstanding =>150% - <175%
----------------------------------------------------
Outstanding =>175% - 200%
----------------------------------------------------
C. Award Determination
-------------------
================================================================================
STRATEGIC MILESTONES PAYOUT AMOUNT
----------------------------------
total annual incentive opportunity X target incentive percent X payout factor
= Strategic Milestones Payout Eligibility
================================================================================
1. Notwithstanding anything to the contrary, the maximum payout, if any,
a participant may receive is 200% of the target incentive amount.
2. The foregoing Strategic Milestones payout eligibility calculation is
intended to set forth general guidelines on how awards are to be
determined. The purpose of this plan is to motivate the participant to
perform in an outstanding manner. The President and CEO has discretion
under this plan to take into consideration the contribution of the
participant, the participant's management of his/her organizational
unit and other relevant factors, positive or negative, which impact
the company's, the participant's organizational unit(s), and the
participant's performance overall in determining whether to recommend
granting or denying an award, and the amount of the award, if any. If
the participant is the President and CEO, such discretion is exercised
by the CC.
VI. PAYOUTS
-----------
A. Payouts will be made within 90 days after the end of the plan year.
B. In the event of a participant's death, disability, retirement or leave of
absence prior to payout from the plan, the payout, if any, will be
recommended by the President and CEO to the CC which shall have sole
authority for approval of the payout.
C. A participant who resigns, or whose employment is terminated by the
company, with or without cause, before payout from the plan is distributed,
will not receive a payout. Exception to this provision shall be made only
with the approval of the CC.
D. A participant who transfers between businesses of the company, will have
his/her payout prorated to the nearest fiscal quarter for the time spent in
each business, based on the achievement of strategic milestones established
for the position in each business, and based upon a judgment of the
participant's contribution to the achievement of goals in each position,
including interim revisions, if appropriate.
E. A participant who is appointed to a position with a different target
incentive percent will have his/her payout prorated to the nearest fiscal
quarter for the time spent in each position, based on the achievement of
strategic milestones established for each position.
F. A participant who is hired or promoted into an eligible position during the
plan year may receive a prorated payout as determined by the CEO, in
his/her sole discretion, subject to the approval of the CC.
VII. ADMINISTRATION AND OTHER MATTERS
-------------------------------------
A. The plan is effective for the plan year. It will terminate, subject to
payout, if any, in accordance with and subject to the provisions of this
plan.
B. This plan will be administered by the CEO, who will have authority to
interpret and administer this plan, including, without limitation, all
questions regarding eligibility and status of the participant, subject to
the approval of the CC.
C. This plan may be withdrawn, amended or modified at any time, for any
reason, in writing, by the company.
D. The determination of an award and payout under this plan, if any, is
subject to the approval of the President and CEO and the CC. This plan does
not confer upon any participant the right to receive any payout, or payment
of any kind whatsoever.
E. No participant shall have any vested rights under this plan. This plan does
not constitute a contract.
F. All deductions and other withholdings required by law shall be made to the
participant's payout, if any.